CEO Bonuses… It’s Not About The Money Until It Is

When you’re a CEO, it’s never about the money, until it is about the money… and then it’s all about the money.

At the end of my first year as CEO, I thought I did a good job and would get a good bonus. Why shouldn’t I? I worked hard, I fixed problems, and I met goals. I gave my leadership team solid bonuses. I hoped for a good bonus myself, but what I got was something like the Jelly-of-the-Month Club (like Clark Griswold in the 1983 National Lampoon movie Vacation, played by Chevy Chase).

When CEOs start a new position, it’s never about the money… at first. It’s like a honeymoon period filled with creativity, getting to understand your team and strategic planning. Then suddenly you get to a point where you are judged on your P&L. If you can show your investors that you can generate positive numbers in both revenue growth and profit (AKA the money), the honeymoon continues. But if it’s bad, everything you are judged on from that point forward is about the money.

Taking on a multi-billion dollar business, I thought I’d be given a get-out-of-jail-free card my first year for P&L performance (or non-performance) due to pre-existing issues and decisions made by my predecessor’s team. But judging by the jelly bonus, clearly I was wrong.

“The great CEOs learn to deal with whatever curveball gets thrown their waY.”

When you’re the CEO, there are no breaks. As soon as you sit in the role, you own it. It doesn’t matter if the last CEO created a big expense problem and it doesn’t matter if the board knew about the pre-existing issues that have crushed your P&L. You now own it, and that’s an awakening.

Even when you don’t inherit problems, they still find you. As soon as any CEO creates a plan, there is always something that happens that impacts the plan. The CEO can’t go back to the board and say “I need a do-over because this happened.” The great CEOs learn to deal with whatever curveball gets thrown their way—a change in the market, an issue with employees, the loss of a key customer, adverse legislation—and still make their numbers.

So how does a CEO expect the unexpected and prepare for every contingency to ensure a great P&L?

1. Don’t get lulled into the creative honeymoon phase without keeping a close eye on your P&L. Every decision you make has an impact on the P&L and the sooner you start focusing on how your top-line growth is going to translate into bottom-line growth, the better.

2. Don’t think you can simply grow your way out of problems with the bottom line. Revenue growth alone, with no growth to the bottom line, is no way to run a company. Think hard about every expenditure (marketing, new hires, etc.) and make sure each will pay for itself and then some.

3. Take a page from the military playbook. The military practices contingency planning exercises to test strategy and prepare for all possible scenarios. Few companies can afford to be as thorough as the military, but if your team isn’t prepared for at least the most common business challenges (competitors launching break-through products, delivery disruption, loss of a major customer) and ready to leverage unforeseen opportunities (competitor in bankruptcy, favorable legislation, sudden surge in consumer interest) you aren’t doing your job as CEO.

4. Don’t make decisions that sacrifice tomorrow for today. No matter what problems your company may have faced, none of them are acceptable excuses. It’s your problem and you have to get the P&L out of that problem with sustainable solutions that will help you meet your targets for years to come.

My first year taught me how to get it right by making the right investments in customers and employees while watching the bottom line like a hawk. But it took a learning experience to get there. So remember, this is a journey and there is room for some error along the way, but at the end of the day you alone are accountable. If you can’t get things fixed as quickly as possible and turn your strategy into bottom-line results (again, AKA money), you better get used to eating a lot of jelly.

Mike Salvino is a managing director at Carrick Capital Partners, an investment firm focused on operationally scaling growing businesses that provide software and technology-enabled services. He joined the firm from Accenture Operations where he was Group CEO.

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